TMI Blog2021 (11) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... s obliged to reimburse the GST, notwithstanding, that Kone had not availed of such benefits - It is seen that the Arbitral Tribunal found both the parties wanting for not engaging in joint discussions for exploring the possibility of availing Input Tax Credit under the CGST Act. Accordingly, the Arbitral Tribunal reasoned that both the parties should equally bear the amount of Input Tax Credit that may have been possibly available. This Court is of the view that since the impugned award does not address the dispute, the impugned award in this regard is liable to be set aside. It is also relevant to refer to Section 28(2) of the A C Act. The Arbitral Tribunal might decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so and not otherwise. The phrase ex aecquo et bono means according to equity and conscience. It empowers the arbitrator to dispense with consideration of the law and to take decisions on notions of fairness and equity. The term amiable compositeur is a French term and means an unbiased third party who is not bound to apply strict rules of law and who may decide a dispute according to justice and fairness. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Contract (SCC) as applicable to the Contract Agreement, it was agreed that the contract price would be inclusive of all taxes, levies duties, cess, freight, insurance and other incidental charges including statutory deductions towards income tax works, contract tax etc. except the following: (a) concessional customs duty as applicable for project imports under Chapter 98.01 of Customs Tariff Act; (b) Excise Duty; and (c) VAT/GST . 5. It was agreed that the aforesaid levies would be reimbursed by DMRC on actual basis and on submission of documentary proof. It was also agreed that any new taxes or other statutory variations in customs/excise duty and sales tax on finished products would be to the account of DMRC. However, Kone was required to submit relevant documents to prove the same. 6. Kone completed its obligations under the Contract Agreement in certain stages. 7. Out of the 143 lifts to be supplied and commissioned, Kone supplied and installed 10 lifts that were made operational for public use in October 2015. Kone raised invoices for the supply, erection and commissioning of the said elevators and charged Value Added Tax (VAT) at the rate of 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annum from 24.10.2017 till the date of payment. In addition, Kone also claimed costs and expenses. 13. DMRC filed its Statement of Defence disputing Kone s claims. DMRC also filed its counter-claim. DMRC claimed that since the milestones leading up to delivery of the elevators at site had been achieved prior to 30.06.2017 and the elevators had been incorporated at its site, Kone was required to issue VAT invoices in respect of the said elevators and GST was not chargeable on the said supplies. Accordingly, DMRC claimed that it was entitled to refund of ₹2,88,76,473/-, which was paid to Kone against reimbursement of GST. Based on the aforesaid premises, DMRC made a counter-claim for the aforesaid amount of ₹2,88,76,473/- along with interest at the rate of 24% per annum. 14. At this stage, it is relevant to refer to the contentions advanced by DMRC to dispute the claims raised by Kone. Before the Arbitral Tribunal, DMRC contended that the elevators in question had been incorporated as a part of works prior to the GST regime coming into force with effect from 01.07.2017 and therefore, the taxable event for levy of VAT under the Delhi Value Added Tax Act, 2004 (hereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the Respondent is maintainable and/or within the jurisdiction/scope of authority of the Hon ble Arbitral Tribunal as per the provisions of the Arbitration and Conciliation Act, 1996? If Yes, whether the Respondent is entitled to award of the counter claim? Issue 3(a): Whether GST or DVAT is applicable for the transaction between the parties under the Contract Agreement? Issue 3 (b): Whether claimant has not caused financial loss to respondent by raising an invoice under GST law instead of VAT Law. Issue 4: Whether there have been any violations of the provisions of the Central Goods and Service Tax Act, 2017 or Delhi Value Added Tax Act, 2004 (as the case may be) by the Claimant or the Respondent? Issue 5: Whether claimant has not enriched himself at the cost of the respondent by not claiming input tax credit of the excise duty and claiming the excise duty as an expense for the purpose of Income Tax? Issue 6: Whether the Claimant or Respondent is entitled to interests and/or costs? Issue 7: To what other reliefs are the Parties entitled to. Findings of the Arbitral Tribunal 18. The Arbitral Tribunal accepted that the incidence of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and Services Tax Act, 2017 (hereafter the CGST Act ) or the DVAT Act and, whether Kone had enriched itself at the cost of DMRC, were decided in favour of Kone. 22. Kone s claim for pre-award interest was denied. However, the Arbitral Tribunal granted future interest at the rate of 9% per annum if the awarded amount was not paid within a period of ninety days from the date of the award. 23. The Arbitral Tribunal awarded 50% of the amount claimed, that is, ₹63,65,021/-, in favour of Kone in view of its finding that both the parties were responsible for not availing the Input Tax Credit in respect of the Excise duty paid on the lifts in question. 24. Both the parties are aggrieved by the impugned award and have assailed the same. Submissions 25. Mr Johri, learned counsel appearing for DMRC had restricted the challenge to the impugned award on three fronts. First, he submitted that the Arbitral Tribunal s decision to hold DMRC jointly responsible for not availing Input Tax Credit in respect of the Excise duty paid on the manufacture of the 85 lifts is ex facie erroneous as Kone was the assessee and it was its obligation to claim the said deduction. Next, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 30.06.2017; that is when the lifts were incorporated in the buildings. 30. The Arbitral Tribunal did not accept the aforesaid contention. The Arbitral Tribunal found that the dates on which the lifts were incorporated in the works were not ascertainable from any of the documents provided by the parties and there was insufficient material to accept that the lifts had been incorporated in the building prior to 30.06.2017. Accordingly, the Arbitral Tribunal held as under: 41. In absence of any evidence, the AT is not inclined to accept the contention of the respondent that 85 lifts were incorporated during the DVAT regime, and therefore, the question of tax invoice in DVAT regime does not arise. It is observed that in DVAT regime, the claimant used to raise tax invoice at the stage of handing over of the elevators and the respondent was reimbursing the DVAT invoice at the time of issue of Taking Over Certificate (a milestone determined in the Agreement). AT has no hesitation to conclude that liability of DVAT was deferred by both the parties till handing over of the elevators and issue of Taking Over Certificate, as there was no provision of maintaining records of date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Tribunal not to accept the aforesaid contention. 34. Thus, the principal question to be addressed by the Arbitral Tribunal was whether Kone was entitled to Input Tax Credit for the Excise duty paid on the lifts in question and, whether the failure on the part of Kone to avail of the Input Tax Credit entitled DMRC to withhold an amount equivalent to the said amount. 35. In view of the said dispute, the Arbitral Tribunal had framed the following issue 1(b) Whether claimant has not erred in complying with the provisions of the GST law by not claiming Input Tax Credit of the excise duty paid on inputs which is held in its stock as on 30.06.2017. 36. According to DMRC, Kone was entitled to avail of the benefits of the transitional provisions under Section 140 of the CGST Act. DMRC had also relied on Section 140(3) of the CGST Act, which reads as under: 140(3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated the 20th Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India, Ministry of Finance Department of Revenue CBEC, GST (Police Wing)] clarifying that since Kone had not availed of the benefits of Notification No. 26/2012 dated 20.06.2012, it was not eligible for the sanction credit. 39. Kone claimed that in view of the clarification, it was clear that the GST Department would not accept any claim for Input Tax Credit on account of Excise duty paid prior to 30.06.2017. DMRC disputed the same and submitted that the said clarification was not binding. 40. Kone had also relied on the following judgments in support of its contention: Kone Elevator India Private Limited v. State of Tamil Nadu and Ors., 2014 (202) ECR9173 (SC), paragraph 64; and Abel Space Solutions LLP v Shindler India Private Limited (2018) 68 GST 746, paragraphs 3 to 6. 41. It is also relevant to note that DMRC had also relied upon Clause 11.1.2 of the General Conditions of Contract (GCC) as applicable to the Contract Agreement and, on the strength of the said clause submitted that Kone was obliged to avail Input Tax Credit in respect of Excise duty paid on stock held on 30.06.2017 in accordance with Section 140(3) of the CGST Act and pass on the benefit of such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regime and the argument put forth in para 95 to 98 above has no relevance to the Claim and counterclaim. 44. The aforesaid view expressed by the Arbitral Tribunal is a plausible one and this Court is unable to accept that the same warrants any interference. 45. Insofar as the clarification obtained by Kone regarding applicability of Section 140(3) of the CGST Act is concerned, the Arbitral Tribunal found that the same did not have any force of law . 46. In regard to the question whether Input Tax Credit in respect of the Excise duty paid prior to 30.06.2017, the Arbitral Tribunal did not return any definite finding. The Arbitral Tribunal observed that Kone was required to take recourse to Section 97 of the CGST Act and seek an advance ruling in respect of the admissibility or non-admissibility of Section 140 of the CGST Act and, Kone had erred in not fully exploring the possibility of such an exemption. The relevant conclusion of the Arbitral Tribunal is reproduced below: 93. In the absence of not having taken advance ruling and appeal (if required) and the non-availability of the such ruling from any of the party or any precedence quoted by the party, in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of such benefits. 48. It is seen that the Arbitral Tribunal found both the parties wanting for not engaging in joint discussions for exploring the possibility of availing Input Tax Credit under the CGST Act. Accordingly, the Arbitral Tribunal reasoned that both the parties should equally bear the amount of Input Tax Credit that may have been possibly available. 49. This Court is of the view that since the impugned award does not address the dispute, the impugned award in this regard is liable to be set aside. 50. It is also relevant to refer to Section 28(2) of the A C Act. The Arbitral Tribunal might decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so and not otherwise. The phrase ex aecquo et bono means according to equity and conscience. It empowers the arbitrator to dispense with consideration of the law and to take decisions on notions of fairness and equity. The term amiable compositeur is a French term and means an unbiased third party who is not bound to apply strict rules of law and who may decide a dispute according to justice and fairness. In view of Section 28(2) of the A C Act, the Arbitral Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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